How do I raise my credit score from 720 to 800?

Question

My FICO 8 score is 721 and my VantageScore 3.0 is 735. I have opened 2 accounts in the past 2 years:

• An AMEX Gold card in October 2022
• $30k loan in May 2022 to purchase a vehicle

I also have a 30 year mortgage that I am 3 years into. I have an additional AMEX Platinum card I opened in 2019 this was my first credit card. Before then I had a auto loan that I started in 2018 and paid off early in 2021. The only other money I have ever borrowed was a personal loan in 2013 that I paid off in 2018.

I have never missed or had a late payment ever. I use the credit cards for gas and grocery and dining to earn points and pay them off as soon as the transactions are no longer in a "pending" status. How do I raise my credit score to 800?

Answer 1

To earn a good credit score, you have to borrow a higher-than-average amount of money and make your monthly payments consistently.

That usually means that you have to pay a lot in interest, unless you can churn through credit cards monthly and pay them off. But things like car loans and home loans will require you to pay interest.

and pay them off as soon as the transactions are no longer in a PENDING status.

This is not helpful from a credit score perspective. The banks do not care that you pay down the balance as quickly as possible, just that you pay the minimum amount by the due date of each statement. You may actually be hurting your credit score by keeping your utilization artificially low.

The bottom line is that if you use credit responsibly (which it sounds like you do), don't overuse credit (which it sounds like you don't) you'll be fine. Don't fret over chasing a credit score that doesn't actually help as much as you may think it would. You'll save a lot more by managing your expenses effectively (e.g. not paying interest) than you'll ever save by improving your credit score.

Answer 2

The details (like weighting factors) of the credit scoring models are considered proprietary information, but there are general principles that they all use. Some of the factors they take into consideration are:

1. Credit history. For how long have you had accounts in good standing? If you have a relatively short history--i.e., you are a new borrower, this is less preferred than someone who has a long and extensive history of responsible borrowing. Metrics used include the average age of credit and the oldest open account.
2. Total amount of credit. How much have other lenders been willing to lend to you? The more, the better, assuming again, no derogatory marks or late payment history. How many open accounts do you have?
3. Types of credit. Credit cards, car loans, and home loans are all different. If you can handle more types of credit, the better.
4. Utilization. If you don't use a lot of credit relative to how much has been extended to you, this looks better. But because utilization can vary from month to month, it also does not have a long-term effect on your score.
5. Hard inquiries. If you have recently asked for a line of credit, then this counts against you. The impact ranges; typically it's small for a credit card and a bit larger for a home loan. The effect drops off after a few years.
6. Late payments and delinquencies. This is a huge one. Even a single late payment can torpedo your score. Defaulting on debt is enough to drop your score by hundreds of points.

There are other criteria but these are ones most people know about. In your case, it doesn't sound like you have much of a credit history; you have relatively few open accounts. Early payment of a loan is not necessarily to your favor because the scoring models really like seeing open accounts with regular payments on time. In the absence of any derogatory marks, these would be the main reasons for not having a score in the 800+ range.

Contrary to popular belief, 0% utilization is not a bad thing. Any potential hit to your score for being at 0% instead of, say, 1%, would be tiny. The actual issue is closing out any open accounts by paying off the loan. Another issue is lack of activity on revolving lines of credit: the card issuer has expenses related to keeping your account open, and not using the card means they don't get the merchant fees. So this might be a source for the misconception that 0% utilization is bad: people confuse utilization with inactivity.

In closing, I want to emphasize that whenever we look at credit score, it's just the result of a model that tries to weigh all the information in your credit file. A prospective lender is not going to just approve you solely on the basis of your score: they will look at your file. The score is just a convenient way for them to get a quantitative sense of your creditworthiness relative to other borrowers, and many lenders use the score as a way to make quick decisions--a good score is like a foot in the door. They can still deny you if they see something in your file they don't like. Focusing on optimizing the score is missing the point; the file is what really matters.

Answer 3

If getting a prime score is really something you care about, it really only takes two steps:

1. Acquire more credit. You're not doing badly, but an additional non-Amex card would probably be to your benefit, especially as that auto loan ages out. If you've never run a big purchase through the Amex, you could do that too (and then pay it off, of course), which will increase your "high balance" for as long as that account remains open. The agencies are looking for evidence that you had a chance to get yourself in trouble, and then didn't. Some of the things you have to do to accomplish that are slightly unintuitive. Obviously, be responsible, pay attention to the terms of anything you sign up for, don't buy anything you can't cover, and don't buy anything just to be buying something. But you don't have to carry a balance or subject yourself to lots of interest.

2. Wait. With moderate utilization, long account lifetime, and no negative reports, your scores will go up with time. The upper 30 points of the FICO 8 score are difficult to crack, but just plain paying all your bills for a decade should put you in the 800-820 zone.